Eq: Total Market
Here is a mundane but important question: what is the best single fund to track the whole market? There is now a wealth of options, from Fidelity’s free index tracker all the way to popular, but more costly SPY. The answer to this question is not as straightforward as one might think, as each of the funds has its own characteristics. For instance, while Vanguard’s VTI is popular, it has a quirky structure that can boost unrealized gains. It is also harder to trade without fees. Fidelity’s zero fee index mutual fund is a good choice, but only available on its own platform. Blackrock’s ITOT might be the best choice overall when considering fees, performance, and availability.
FINSUM: For being considered “vanilla”, there certainly are a lot of different flavors of index tracker these days.
The market had a relief rally right after the election results came in. Yesterday wasn’t so good. The big question on everyone’s mind is where the market is headed from here. Looking historically, the current political arrangement (split Congress, Republican presidency) is the worst for markets. The S&P 500 has had the lowest returns in the current political set up, though it has only occurred four times since 1900.
FINSUM: The market’s outlook for 2019 appears fairly bleak to flat for us. The main reason why is that there won’t be another major tax package, and the great earnings of this year will make 2019 comparisons look weak. Growth is also likely to slow.
Investors have been really afraid of the next bear market for the last few months. Ever since spreads grew tighter and the economy became very strong, fears of a looming recession and accompanying bear market have been rampant. Here are six signs to consider about a potential bear market. Firstly, look at high yield bond spreads. When they start to rise, its shows the credit cycle is ending, potentially signaling a recession. Yield curve steepness (or inversion) is another key metric. Deal activity in M&A is also excellent sign. Weekly jobless claims are another strong leading indicator. Finally, look at investor sentiment. When investors are very confident, that tends to be when the bear bites.
FINSUM: This is a pretty good list of leading indicators. Some are flashing red right now, while other are humming along nicely.
With the midterms finally over, investors need to think critically about how the market will respond. In particular, specific sectors will have different reactions. With that in mind here are six sectors to watch. Drugmakers seem likely to be seen favorably as the split between the parties means new regulation governing prices seems less likely. Banks could go either way, but most expect Trump’s deregulatory agenda to continue. Technology is looking less favorable as regulation and scrutiny of the sector is one of the few areas of bipartisan agreement. Industrials are looking less favorable as well, as the odds of a big infrastructure package have decreased. Energy seems neutral, as no big changes appear likely. Finally, marijuana stocks are likely to jump.
FINSUM: There is going to be quite a range of reactions over the next few months as each sector digests how the newly split Congress will affect them.
The midterms are finally over, and with it the possible end to the volatility of the last month. Many on Wall Street now say stocks are ready to gain as buying fever takes over. The election went almost exactly as expected, which has set up a possible goldilocks scenario for markets. With Congress split, it is likely that policy gridlock will take over, a situation many think is ideal for stocks. The idea is that the less government does, the more room the market has to operate uninhibited.
FINSUM: The key here is that a split Congress means there likely won’t be any huge policy changes over the next two years. That seems favorable for stocks given the political uncertainty over the last 24 months.
The midterm elections are finally in the rearview mirror, and generally speaking, the results are exactly what the market expected. That means it may be time for a rush back into stocks after the turmoil of the last month. One analyst put it this way, saying “Following this week’s volatility and the FANGs selloff this week, we’re likely to see traders getting back in and buying the dip. The elections have been a win for both the Republicans and the Democrats, and this will bring balance to the market”.
FINSUM: We do suspect investors will breath a sigh of relief. Firstly, things went according to plan, but secondly, a split Congress is in some ways the best case scenario for stocks.